Protect Yourself from Abusive Mortgage Lending
News reports of financial abuse, particularly in the home mortgage
market, have become increasingly commonplace. It’s important for
consumers to seek a trusted, well established lender and be armed
with the information needed to recognize a good loan from a bad
one. Otherwise, you could end up paying too much or even losing
your home.
Mortgage Tips:
• Be cautious of lenders that seek you out first.
• Don’t allow inaccurate information on a mortgage application
about your income, debt, employment history, intent to occupy
the premises or the value of the home. That is fraud and subject
to criminal penalties.
• If you have good credit, beware of loans with an interest rate
higher than the current average mortgage rate. If you have poor
credit, discuss with your lender the pricing of loans having an
interest rate three points higher than the current average mortgage
rate.
• Although lenders typically pass on third party cost for credit
reports and appraisals, ask your lender to explain costs on a loan
that includes points and fees that add up to more than four
percent of the loan total.
• Never sign a second set of documents that won’t be shared
with all parties. This could be a warning sign that fraud is being
committed.
• Be sure the terms on the mortgage are the terms you agreed
to before closing, and do not be pressured into signing “new
deals” at closing.
• If information is added after you have signed a document, you
may still be responsible. Cross out any blanks or insert “N/A”
(not applicable).
• Be careful of refinancing repeatedly after short periods of
time. Each refinancing often comes with new fees and possible
prepayment penalties.
• Don’t let anyone convince you to borrow more money than
you need or more money than you can afford to repay.
• Loan costs can be compared by looking at the Good Faith
Estimate (GFE) form that all lenders are required to provide to
a borrower at the time (or within three days) of application.
Things to Consider:
• Check your bank or other online resources for a mortgage
calculator to determine if you can afford to borrow, and if so,
how much.
• When considering adjustable rate or interest-only loans, it
is important to look at both current and future income. The
monthly payment on these loans will rise, but will your salary?
• Many mortgage borrowers that received high cost mortgage
loans could have qualified for a traditional bank loan. Find a
traditional, local lender first, and if you don’t qualify, consider
working to improve your credit score and waiting to take out a
loan.
• Small loans should be paid off or paid down before you look
for a mortgage. This will help increase your credit score and
qualify you for lower interest rates.
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Giving the Bounce to Counterfeit Check Scams
It’s your lucky day! You just won a foreign lottery! The letter says so.
And the cashier’s check to cover the taxes and fees is included. All you
have to do to get your winnings is deposit the check and wire the
money to the sender to pay the taxes and fees. You’re guaranteed
that when they get your payment, you’ll get your prize.
There’s just one catch: this is a scam. The check is no good, even
though it appears to be a legitimate cashier’s check. The lottery
angle is a trick to get you to wire money to someone you don’t know.
If you were to deposit the check and wire the money, you would soon
learn that the check was a fake. And you’re out the money because
the money you wired can’t be retrieved, and you’re responsible for
the checks you deposit — even though you don’t know they’re fake.
This is just one example of a counterfeit check scam – there are
many more.
The Federal Trade Commission, the nation’s consumer protection
agency, reports counterfeit check scams are on the rise. The
scammers use high quality printers and scanners to make the checks
look real. Some of the checks contain authentic-looking watermarks.
These counterfeit checks are printed with the names and addresses
of legitimate financial institutions. Even though the bank, account and
routing numbers listed on a counterfeit check may be real, the check
still can be a fake. These fakes come in many forms, from cashier’s
checks and money orders to corporate and personal checks.
Avoiding a counterfeit check scam:
• Throw away any offer that asks you to pay for a prize or a gift. If it’s
free or a gift, you shouldn’t have to pay for it. Free is free.
• Resist the urge to enter foreign lotteries. It’s illegal to play a foreign
lottery through the mail or the telephone, and most foreign lottery
solicitations are phony.
• Know who you’re dealing with and never wire money to strangers.
• If you’re selling something, don’t accept a check for more than the
selling price, no matter how tempting the offer or how convincing the
story. Ask the buyer to write the check for the correct amount. If the
buyer refuses to send the correct amount, return the check. Don’t
send the merchandise.
• As a seller, you can suggest an alternative way for the buyer to pay,
like an escrow service or online payment service. There may be a
charge for an escrow service. If the buyer insists on using a particular
escrow or online payment service you’ve never heard of, check it out.
Visit the website, read the terms of agreement and privacy policy, and
call the customer service line. If there isn’t one — or if you call and
can’t get answers about the service — don’t use them. To learn
more about escrow services and online payment systems,
visit www.ftc.gov/onlineshopping/.
• If you accept payment by check, ask for a check drawn on a local bank,
or a bank with a local branch. That way, you can make a personal
visit to make sure the check is valid. If that’s not possible, call the
bank where the check was purchased, and ask if it is valid. Get the
bank’s phone number from directory assistance or an Internet site
that you know and trust, not from the check or from the person who
gave you the check.
• If the buyer insists that you wire back funds, end the transaction
immediately. Legitimate buyers don’t pressure you to send money
by wire transfer services, and you have little recourse if there’s a
problem with a wire transaction.
• Resist any pressure to “act now.” If the buyer’s offer is good now,
it should be good after the check clears.
If You Think You’re a Victim, Contact:
Bureau of Financial Institutions-State Chartered Banks
1300 East Main Street, Suite 800
Richmond, VA 23219
(804) 371-9657
Office of the Comptroller of the Currency-National Banks
250 E Street, SW
Washington, DC 20219
(202) 874-5000
Office of Thrift Supervision-Federal Thrifts
1700 G Street, NW
Washington, DC 20552
(202) 906-6000
Virginia Department of Agriculture and Consumer Services-Non-Financial Related Issues
102 Governor Street
Richmond, VA 23219
(804) 786-2373
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Taking Charge of Your Credit Cards
Credit cards can be convenient, safe and useful financial tools,
but must be selected and used wisely. The average credit card
debt of a low- and middle-income household in America is $8,650
according one survey and continues to increase. Consider these
timely tips for choosing and using your credit cards.
Choosing the Card that is Best for You
1. Shop around before accepting a card offer. Terms and
conditions vary widely, so it’s important to compare offers. The
Annual Percentage Rate (APR) is the amount of interest assessed
on the outstanding credit card balance. APRs can vary greatly and
different APRs can be charged on the same card based on types
of balances carried on the card!
• Purchase balances reflect transactions initiated to purchase
goods or services in a store or online.
• Cash advance balances are incurred from cash advances
obtained at ATMs, convenience checks or at a bank. The APR is
typically higher for cash advances, interest starts accruing from the
date of the advance and transaction fees are often charged.
• Transferred balances. Many credit cards allow you to transfer
balances from other cards. Be aware transfer fees are often charged
for this service and typically the low APRs advertised are only temporary.
2. Read the fine print looking for hidden fees and penalty rates.
Many cards have punitive fees including late fees, cash advance fees,
over-the-limit fees and balance transfer fees. Higher penalty interest
rates may also be charged if you exceed your credit limit, make a late
payment or if your payment is returned because you don’t have enough
money in your account.
3. Know how your payments will be applied. Most companies apply
payments to balances with the lowest APRs first. So if you don’t pay
the balance in full each month, you will be paying longer on the
balances with higher APRs, like cash advances and transfer balances.
4. If you typically pay the balance off each month, look for a card
with low or no annual fee and extended grace periods.
5. If you do not pay the balance in full each month, you should focus
on cards that offer lower APRs for the types of balances you carry.
Also, pay close attention to how and when your APR may change.
Tips for Taking Charge of Your Credit Cards
1. Pay off all balances in full every month or pay as much as you can,
making the largest payment on cards with the highest interest rate.
2. Know your credit limit and stay below it! Card issuers charge a
penalty for each transaction that exceeds your credit limit. Exceeding
your credit limit can also damage your credit score.
3. Seek credit counseling as soon as financial problems arise.
Information regarding free counseling services in your area can be
found at www.debtadvice.org or by calling 1-800-388-2227.
4. Reduce the number of direct mail offers you receive for new
cards by calling 1-888-5-OPTOUT (1-888-567-8688).
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How to Improve Your Credit Score
Pay Down Past Due Accounts
Any amounts that are past due destroy your credit score. Work at
paying down past due balances as soon as possible; then
normal payments can be made and will reflect paid on time.
Pay Charge Offs and Liens within the past 24 months
Any charge offs or liens within the past 24 months damage your
credit score. Work at paying these as quickly as possible.
Check Your Limits and Distribute Balances
Make sure your credit card company reports your credit limit to
the credit bureau and then keep your card balances at 50
percent of that limit or below. Anything over 70 percent of your
limit damages your credit score.
Don’t Close Your Credit Cards, Keep Old Cards Active
Keep the number of credit cards you have between three and
five to better your credit score. If you need to close some, the
newest cards are the ones to close. People that have credit for
a longer period of time are assumed to be at less risk of defaulting
on payments. Use the old card at least once every six months to
avoid it moving to inactive.
Call to Eliminate Late Payments from Your Credit Report
Once you become current on any late payments, contact all creditors
that have reported the late payments to the Credit Bureau and
request they be removed. Persistence and politeness usually
result in success on this one!
Eliminate Collection Accounts
Not all collection agencies will do this but many will, and it is well
worth your effort to try. When you are getting ready to pay off a
collection, contact the collection agency and make arrangements
to pay it off with the condition they remove all reporting from the
credit bureaus. Request a letter from them that states this agreement.
For Your Free Credit Report:
Equifax 800-685-1111 www.equifax.com
TransUnion 800-888-4213 www.transunion.com
Experian 888-397-3742 www.experian.com
What Makes up a Credit Score?
Payment History 35%
Balances Carried 30%
Credit History 15%
Type of Accounts 10%
Inquiries 10%
What is a Credit Score?
A credit score is a number that helps lenders and others predict
how likely you are to make your credit payments on time. Each
score is based on the information in your credit report. These
credit scores (FICOs) were developed by Fair Isaac Corporation
and are today’s most commonly used scoring system. FICO
scores range from 300-850, with most people scoring in the
600-700 range. FICO scores above 700 are very good and are
a sign of financial health. FICO scores below 600 indicate higher
risk and could result in a higher interest rate.
Why Your Credit Score is Important
Credit scores affect whether you can get credit and what you pay
for credit cards, auto loans, mortgages and other kinds of credit.
For most kinds of credit scores, higher scores mean you are
more likely to be approved and pay a lower interest rate on new
credit. Want to rent an apartment? Without good scores, your
apartment application may be turned down by the landlord. Your
scores also may determine how big a deposit you will have to
pay for telephone, electricity or natural gas service.
Lenders look at your scores all the time. They look at your scores
when deciding, for example, whether to change your interest rate
or credit limit on a credit card, or whether to send you an offer
through the mail. Having good credit scores makes your financial
dealings easier and can save you money in lower interest rates.
That’s why they are a vital part of your financial health.
Consider the following example: A couple is buying their first house.
They want a 30-year mortgage and their FICO credit score is 720.
They could qualify for a mortgage with an interest rate up to three
percentage points lower than a couple with a FICO score of 580.
On a $100,000 mortgage loan, that difference in interest rate
accounts for as much as $2,400 a year, adding up to $72,000
over the loan’s 30-year life. Your credit score does matter!
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Protect Yourself Against Identity Theft
Identity theft occurs when someone uses your personally
identifying information like your name, Social Security number
or credit card number, without permission, to commit fraud
or other crimes.
Avoiding Identity Theft
• Shred financial documents before discarding.
• Protect your Social Security number. Don’t carry your card
in your wallet or write your number on checks.
• Don’t give personal information over the phone, through the
mail, or over the Internet unless you know and trust the party
asking for it.
• Never click on links sent in unsolicited e-mails; instead type
in a web address you know. Use firewalls, anti-spyware, and
anti-virus software to protect your home computer and keep
the software up-to-date.
• Don’t use obvious passwords such as your birth date, your
mother’s maiden name, or the last four digits of your Social
Security number.
• Keep personal information in a secure place at home,
especially if you have roommates, employ outside help,
or are having work done in your house.
Identity Theft Indicators
• Bills that do not arrive as expected
• Unexpected credit cards or account statements
• Denials of credit for no apparent reason
• Calls or letters about purchases you did not make
• Unusual transactions appearing on financial account and billing statements
Protect Yourself from ID Theft
• Shred financial information when it’s no longer needed
• Carry only minimal ID and credit cards
• Drop outgoing mail in postal collection boxes
• Give out your Social Security number only when absolutely necessary
• Obtain a copy of your credit report at least annually
• Opt-out of preapproved credit offers (888-567-8688)
• Place your phone numbers on the “National Do Not Call”
registry (888-382-1222 or www.donotcall.gov)
If Your ID is Stolen
• Place a “fraud alert” on your credit reports with the three
nationwide consumer reporting companies. The alert tells
creditors to follow certain procedures before they open
new accounts in your name or make changes to your current accounts.
• Close accounts that have been tampered with or established
fraudulently and ask for written verification that they have been
closed and fraudulent debt discharged.
• Call the security departments of each company where an
account was opened or changed without your permission.
Follow up in writing, with copies of supporting documents.
• Use the ID Theft Affidavit at www.ftc.gov/idtheft to support
your written statement.
• File a police report for creditors who will need proof of the crime.
• Report the theft to the Federal Trade Commission.
Important Contact Information:
• Annual Credit Reports
www.AnnualCreditReport.com or call 1-877-322-8228
Write Annual Credit Report Request Service
P.O. Box 105283
Atlanta, GA 30348-5283
• Federal Trade Commission
www.ftc.gov/idtheft or call 1-877-ID-THEFT (438-4338)
Write to Identity Theft Clearinghouse
Federal Trade Commission
600 Pennsylvania Ave.
Washington, D.C. 20580
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Combating Electronic Payment Fraud
As consumers move to the speed and convenience of electronic
payment methods, an increase in payment system fraud does
not have to be the result.
Types of Electronic Payments
Credit cards allow the extension of credit and the delay of payment.
Debit cards allow for a direct debit from your bank account for
point of sale purchases.
Automated Clearing House (ACH) transactions allow single or
recurring payments (such as payroll credits, loan, insurance or utility
payments, etc.) to be automatically initiated to or from bank accounts.
Payment System Fraud
The most common types of electronic payment fraud include:
• Theft of a consumer’s credit or debit card
• Card “skimming” and use of card readers to obtain magnetic
strip information
• Unauthorized ACH transactions
• Consumer negligence in securing pass codes and/or personal
identification numbers (PINs)
• Altered and counterfeit cards
• “Phishing” and pretext calling schemes, where a stranger
attempts to gain your personal or financial information online
or via phone
Avoid Payment System Fraud
• Sign credit and debit cards as soon as you activate them.
• Cut up expired cards before disposing of them.
• Carry only cards you plan to use, securing others in a safe place.
• Never write your PIN on your debit card, or keep it in your
purse, wallet or with your card.
• Never reveal your PIN to anyone.
• Disclose your credit or debit card numbers online or over the
phone only to companies you know and trust.
• Review your periodic statements promptly, comparing them to
your receipts.
• Shred statements and receipts when you no longer need them.
• Never respond to unsolicited e-mails or callers requesting account
information verification. Your bank knows this information
and would not ask you to verify it.
Limit Your Financial Losses
• Whenever possible, use your credit card for purchases. Maximum
liability under federal law for unauthorized use of your credit card
is $50, and often your liability may be reduced to zero. By contrast,
unauthorized use of your debit card, if not reported to your bank
within specific time lines, may cause you unlimited liability.
• Immediately report the loss or theft of your debit or credit
card to your bank. If your credit card is stolen, you won’t pay
for unauthorized charges made after you notify your bank.
Once you report a debit card loss or theft, your lost/stolen card
can be terminated, preventing additional, unauthorized use.
• Immediately report statement and billing errors. For credit
card transactions, you do not have to pay the amount in question,
nor will interest accrue on that amount, while the charge is
being investigated. Unauthorized ATM or debit card transactions
must be resolved by your bank within 10 business days of
your claim or provisional credit must be given. Unauthorized
ACH transactions may be returned to the originator within 60
days of the original transaction.
• Your bank is your first and most important point of contact
when you discover your debit or credit card has been lost or
stolen, or when you find unexplained transactions on account or
billing statements.
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Cashier Checks - Good As Cash?
The old adage, “a cashier check is as good as cash,” may, or
may not, be true in today’s world. It is often very difficult for
consumers and banks alike to determine if a cashier’s check
is genuine or counterfeit. Banks often only know the cashier
check is counterfeit when it is returned unpaid.
Depositing A Cashier Check
Banks are often required by federal law to make funds from
deposited items available to account owners before it actually
receives settlement from the bank on which the check was
drawn. Your account agreement states if a deposited item is
returned unpaid, the bank can charge it back to your account
(reverse the deposit.)
Common Cashier Check Scams
Internet Sales Scams
You sell goods (often over the Internet) and the buyer sends
you a cashier check for the price you agreed upon. You ship
the goods to the seller only to later find out the cashier check is
fraudulent.
Excess Fund Scams
You sell goods (often over the internet) and the buyer sends
you a cashier check for an amount in excess of the sales price
and asks you to wire all or some of the money to a third party,
such as a shipping agent.
Advance Fee & Lottery Scams
You receive a letter informing you that you have won a lottery
(often a foreign lottery) or you are the beneficiary of someone’s
estate. The letter states you need to pay a processing or transfer
fee before you can receive your winnings/inheritance, but a
cashier check is enclosed to cover this cost on your behalf, all you
have to do is deposit the check and wire the funds to the agent.
Mystery Shopper Scams
You receive a letter informing you that you have been selected
as a mystery shopper. The letter includes a cashier check that
you are instructed to deposit and use the funds to purchase
merchandise at designated stores, wire a portion to a third party
and keep the remainder.
Protect Yourself
ACCEPT a cashier check only for the amount of your selling price.
KNOW who you are doing business with.
CONSIDER payment options other than cashier checks such as
online payments, credit card payments or wires.
TAKE the cashier check or other monetary instrument to a
branch of the bank on which it is drawn if possible. That bank is
in the best position to determine the check’s authenticity.
TALK to your bank if you are suspicious about the authenticity of
any item you are depositing. The bank can attempt to verify its
authenticity or send it directly to the issuing bank for collection.
BE cautious! One old adage that still remains true is: “If it seems
to be good to be true, it probably is!”
If You Are a Fraud Victim
File a report with local law enforcement.
Contact the Virginia Office of the Attorney General at (804) 786-2071.
Work with your bank on repayment options if the reversal of the
deposit has overdrawn your deposit account.
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Keep Your Financial Information Private
Take advantage of these protective steps to avoid putting your
personal information at risk of identity theft or financial fraud.
• Keep personal and financial information in a safe place.
Shred it when you don’t need it anymore.
• Minimize…carry only the minimal identification and
credit/debit cards you actually need.
• Pay attention to your mail. Know billing cycles and when
to expect statements. Drop outgoing mail in collection boxes.
Ask the U.S. Postal Service for vacation hold when you’re away.
• Provide your Social Security Number only when absolutely necessary.
• Before revealing nonpublic personal financial information,
find out how it will be used or shared with others.
Obtain a copy of your credit report at least annually to verify
accuracy of information. Free upon request (once annually from
each of the three nationwide credit reporting agency) by contacting:
• www.annualcreditreport.com; or 877-322-8228.
Opt-out of pre-approved credit offers.
• Call 888-567-8688 for an automated opt-out of prescreened
solicitation lists from all three nationwide credit reporting agencies.
- OR -
• Contact each of the three national credit bureaus directly:
Equifax, Inc, Options, PO Box 740123, Atlanta, GA 30374-0123
Phone: 800-525-6285.
Experian (formerly TRW) Consumer Opt-Out, 701 Experian Pkwy.
PO Box 919, Allen, TX 75013 Phone: 888-397-3742.
TransUnion Marketing List Opt Out, PO Box 97328,
Jackson, MS 39288-7328 Phone: 888-567-8688.
Get your name off mailing lists, telemarketing lists and e-mail lists.
• List residential phone numbers on the “National Do Not Call” registry –
call 888-382-1222 or register online at www.donotcall.gov.
• To reduce direct mail solicitation, list residential addresses with
Direct Marketing Association (www.the-dma.org), Mail Preference
Service, PO Box 643, Carmel, NY 15012-0643.
• List e-mail addresses with Direct Marketing Association,
E-mail Preference Service, www.e-mps.org.
More consumer information is available from:
• The Federal Trade Commission at www.ftc.gov or 877-382-4357.
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